Chapter 15 SASS Inc. provides software consulting services to wholesale and retail clients. SASS has...
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Accounting
Chapter 15
SASS Inc. provides software consulting services to wholesale and retail clients. SASS has two support departmentsadministrative services (AS) and information systems (IS)and two operating departmentswholesale software (WHOLESALE) and retail software (RETAIL). For the first quarter of 2017, SASSs cost records indicate the following:
| SUPPORT | OPERATING | ||||
| AS | IS | WHOLESALE | RETAIL | TOTAL | |
| Budgeted overhead costs before any inter-department cost allocations | $600,000 | $2,400,000 | $8,756,000 | $12,452,000 | $24,208,000 |
| Support work supplied by AS (budgeted head count) | 0% | 25% | 40% | 35% | 100% |
| Support work supplied by IS (budgeted computer time) | 10% | 0% | 30% | 60% | 100% |
Required:
a. Allocate the two support departments costs to the two operating departments using the following methods:
i/ Direct method
ii/ Step-down method (allocate IS first)
iii/ Step-down method (allocate AS first)
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